Why is my AO a single colour ? ....grey
If you are trying to Bake the Selected Object pass to the Active object without selecting at least another object, the operation fails: no information can be baked.



To bake a texure from a single object, you should disable the option by unchecking the box.



It comes out  grey because in BI the ambient occlusion get coloured by the Diffuse color (grey in your case).